Author
Kenneth Burdett
Other affiliations: Cornell University, University of Essex
Bio: Kenneth Burdett is an academic researcher from University of Pennsylvania. The author has contributed to research in topics: Wage & Unemployment. The author has an hindex of 34, co-authored 74 publications receiving 6865 citations. Previous affiliations of Kenneth Burdett include Cornell University & University of Essex.
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TL;DR: In this article, the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a spectrum of workers search by sequentially sampling from the set of offers is characterized.
Abstract: The unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized. Wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed. The unique nondegenerate equilibrium distribution of wage offers is constructed for three cases: (1) identical workers and employers, (2) identical employers and an atomless distribution of worker supply prices, and (3) identical workers and an atomless distribution of job productivities. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
1,714 citations
TL;DR: In this article, the authors considered the matching function for symmetric and non-symmetric equilibria and showed that the standard matching function in the literature is misspecified and discussed implications for the Beveridge curve.
Abstract: Suppose that n buyers each want one unit and m sellers each have one or more units of a good. Sellers post prices, and then buyers choose sellers. In symmetric equilibrium, similar sellers all post one price, and buyers randomize. Hence, more or fewer buyers may arrive than a seller can accommodate. We call this frictions. We solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow. The matching function displays decreasing returns but converges to constant returns. We argue that the standard matching function in the literature is misspecified and discuss implications for the Beveridge curve.
533 citations
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TL;DR: In this paper, the authors consider a matching model where agents are heterogeneous and utilities nontransferable, and they utilize this framework to study how equilibrium sorting takes place in marriage markets.
Abstract: Here we consider a matching model where agents are heterogeneous and utilities nontransferable. We utilize this framework to study how equilibrium sorting takes place in marriage markets. We impose conditions that guarantee the existence of a steady state equilibrium and then characterize it. Several examples are developed to illustrate the richness of equilibria. The model reveals an interesting sorting externality that can support multiple steady state equilibria even with constant returns to matching. (EXCERPT)
486 citations
TL;DR: In this paper, the authors considered a labor market matching model where firms post wage-tenure contracts and workers search for new job opportunities, and established a unique equilibrium in the environment considered.
Abstract: In this study we consider a labor market matching model where firms post wage-tenure contracts and workers, both employed and unemployed, search for new job opportunities. Given workers are risk averse, we establish there is a unique equilibrium in the environment considered. Although firms in the market make different offers in equilibrium, all post a wage-tenure contract that implies a worker's wage increases smoothly with tenure at the firm. As firms make different offers, there is job turnover, as employed workers move jobs as the opportunity arises. This implies the increase in a worker's wage can be due to job-to-job movements as well as wage-tenure effects. Further, there is a nondegenerate equilibrium distribution of initial wage offers that is differentiable on its support except for a mass point at the lowest initial wage. We also show that relevant characteristics of the equilibrium can be written as explicit functions of preferences and the other market parameters.
252 citations
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TL;DR: In this article, the authors introduce the concept of ''search'' where a buyer wanting to get a better price, is forced to question sellers, and deal with various aspects of finding the necessary information.
Abstract: The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.
3,790 citations
TL;DR: In this paper, the effect of the increase in the minimum wage in New Jersey and Pennsylvania was investigated. And the authors found that restaurants that were initially paying $5.00 per hour or more (and were therefore largely unaffected by the new law) had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment.
Abstract: On April 1, 1992 New Jersey's minimum wage rose from $4.25 to $5.05 per hour. To evaluate the impact of the new law we surveyed over 400 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Pennsylvania (where the minimum remained constant at $4.25 per hour) provide simple robust estimates of the effect of the increased minimum wage. Our empirical findings challenge the conventional notion that a rise in the minimum causes employment to decline. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 2.5 employees per store. We also compare employment changes at stores in New Jersey that were initially paying $5.00 per hour or more (and were therefore largely unaffected by the new law) to the employment changes at lower-wage stores, where the new law raised wages by 10-15 percent. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment. Finally, we evaluate theoretical models that might explain these results.
2,942 citations
TL;DR: In this article, a nonparametric maximum likelihood estimator for the distribution of unobservables and a computational strategy for implementing it is developed. But the estimator does not account for population variation in observed and unobserved variables unless it is assumed that individuals are homogeneous.
Abstract: Conventional analyses of single spell duration models control for unobservables using a random effect estimator with the distribution of unobservables selected by ad hoc criteria. Both theoretical and empirical examples indicate that estimates of structural parameters obtained from conventional procedures are very sensitive to the choice of mixing distribution. Conventional procedures overparameterize duration models. We develop a consistent nonparametric maximum likelihood estimator for the distribution of unobservables and a computational strategy for implementing it. For a sample of unemployed workers our estimator produces estimates in concordance with standard search theory while conventional estimators do not. ECONOMIC THEORIES of search unemployment (Lippman and McCall [34]; Flinn and Heckman [14]), job turnover (Jovanovic [25]), mortality (Harris [17]), labor supply (Heckman and Willis [23]) and marital instability (Becker [3]) produce structural distributions for durations of occupancy of states. These theories generate qualitative predictions about the effects of changes in parameters on these structural distributions, and occasionally predict their functional forms.2 In order to test economic theories about durations and recover structural parameters, it is necessary to account for population variation in observed and unobserved variables unless it is assumed a priori that individuals are homogeneous.3 In every microeconomic study in which the hypothesis of heterogeneity is subject to test, it is not rejected. Temporally persistent unobserved components are an empirically important fact of life in microeconomic data (Heckman [19]). Since the appearance of papers by Silcock [39] and Blumen, Kogan, and McCarthy [5], social scientists have been aware that failure to adequately control for population heterogeneity can produce severe bias in structural estimates of duration models. Serious empirical analysts attempt to control for these unob
2,940 citations
TL;DR: In this article, the authors argue that the textbook search and matching model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies in response to shocks of a plausible magnitude.
Abstract: This paper argues that the textbook search and matching model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies in response to shocks of a plausible magnitude. In the United States, the standard deviation of the vacancy-unemployment ratio is almost 20 times as large as the standard deviation of average labor productivity, while the search model predicts that the two variables should have nearly the same volatility. A shock that changes average labor productivity primarily alters the present value of wages, generating only a small movement along a downward-sloping Beveridge curve (unemploymentvacancy locus). A shock to the separation rate generates a counterfactually positive correlation between unemployment and vacancies. In both cases, the model exhibits virtually no propagation. (JEL E24, E32, J41, J63, J64)
2,672 citations
TL;DR: This paper surveys the microfoundations, empirical evidence, and estimation issues underlying the aggregate matching function and discusses spatial aggregation issues, and implications of on-the-job search and of the timing of stocks and flows for estimated matching functions.
Abstract: This paper surveys the microfoundations, empirical evidence, and estimation issues underlying the aggregate matching function. There is no consensus yet on microfoundations but one is emerging on estimation. An aggregate, constant returns, Cobb-Douglas matching function with hires as a function of vacancies and unemployment has been successfully estimated for several countries. Recent work has utilized disaggregated data to go beyond aggregate estimates, with many refinements and suggestions for future research. The paper discusses spatial aggregation issues, and implications of on-the-job search and of the timing of stocks and flows for estimated matching functions.
2,351 citations